Philippines took over Japan’s Car part dominance in Asean but cried for cheap imported Cars

According to Raquel Santos, the 127 members of MVPMAP who make 272 different car parts and components, are not exactly happy over the fact that imports of complete cars have over taken locally assembled units. He said the assemblers in the Philippines account for only 39 per cent of total car demand

Japan way behind; PH exports $3.5B car parts to ASEAN

The Philippines has beaten Japan in exporting vehicle transmission assemblies to the ASEAN (Association of South East Asian Nations) region. Every year, according to Ferdinand Raquel Santos, Japanese companies Toyota, Mitsubishi, and Isuzu export $3.5 billion compared to Japan's $1.1 billion.

Raquel Santos, president of the Motor Vehicle Parts Manufacturing Association the Philippines (MVPMAP), told Business Insight cars imported from the region, particularly Thailand, have transmission assemblies made in the Philippines.

The rest of the car parts - wire harness, tires made by Yokohama in Clark, carpets, plastic parts, leatherette seats, seat belts, plastic bumpers, are big in numbers but have smaller values.

He said in value terms the Philippines accounts for about 25 per cent in parts exported to the region. Nearly all of them are accounted for by transmission assemblies. He said a car has 20,000 parts and components. Very few of them, except transmission assemblies  come  from the Philippines.

He explained that Japan might have discovered that producing the assemblies in the region such as the Philippines has the advantage of Thailand.

According to Raquel Santos, the 127 members of MVPMAP who make 272 different car parts and components, are not exactly happy over the fact that imports of complete cars have over taken locally assembled units. He said the assemblers in the Philippines account for only 39 per cent of total car demand.

The rest is imported. Back in 1996, 90 percent of automobiles sold in the Philippines is locally assembled. Imports account for a negligible 10 per cent.

He explained that the reversal of the ratio negatively affects the business of local parts manufacturers in terms of loss of demand.

He said he hopes local assemblers will regain their dominance but pointed out that the tariff agreements are a high hurdle. Under the Asean Free Trade Association (AFTA) many items or products enter the region without a tariff.

He said the fact that a separate agreement with Japan (Japan Philippines Economic Partnership Agreement (Jepepa)) and the coming similar agreements with South Korea and Australia do not help the Philippine makers of auto parts and components improve their business.

Still, Raquel Santos said, there are two models Mitubishi's L-300-and the Crosswind of Isuzu that use 70 per cent local parts and components

A good number of members of the association export parts and components to Thailand and Indonesia. These parts, he said, are common to units assembled in the Philippines.

He laments the fact that the 70,000 workers employed by the association, have not increased precisely because the market of parts makers have been taken over by imported units. He stressed, though that these units also use Philippine-made components notably the transmission assemblies.

Rising volume of imports deny the parts makers the economies of scale. The high cost of power in the Philippines does not help the members of the association either, according to Raquel Santos.

However, he said, there is a necessity for economic groupings to create big bargaining unit with giants of North America and Europe. He said competition with these highly developed countries will force the emerging markets like the Southeast Asian countries to introduce innovation, improve technology and management to be able to compete globally.

Raquel Santos broadly hinted that while the growth of small car parts manufacturers is stymied by rising imports, there is the fact that the Philippines is becoming the hub of manufacturing transmission assemblies as shown by the fact that three Japanese companies are heavily involved in producing them here.

Slowly, Filipino minds and hands are absorbing the technology in making this major car component. This could well be the start of more major components being produced in the Philippines.

Raquel Santos himself has a company producing minor parts like seats. He continues to trying to improve his technology, knowing he said, that modern technology and management efficiency are the keys to any successful operation, production of car parts or any other manufacturing ventures. His hopes are high in the face of negative developments. So are the rest of the members of the association.

With report from Malaya Business Insights

Continue reading

₱2.3 Trillion ($53 Billion USD) budget for 2014 in the Philippines approved by President Benigno Aquino

Women work at a sweatshop sewing clothes under contract with local clothing manufacturers in Manila on July 12, 2013. Visiting World Bank vice president for East Asia and the Pacific Axel van Trotsenburg said the Philippine government needs to convert its recent high economic growth into more jobs for ordinary Filipinos so as to succeed in reducing widespread povert. Image Credity: AFP

Philippines government to dole out billions in programs for the poor

 President Benigno Aquino has approved a proposed P2.3 trillion ($53 Billion USD) budget for 2014, including higher amounts of grants for the poor.

The grants are being funded by the World Bank, to bridge the gap between the rich and the poor, prompting analysts to call for a long-term industrialization plan for real development and poverty reduction.

The government's proposed budget has a high component of poverty reduction, apart from development, Budget Secretary Florencio Abad said.

Last year, Congress approved the allotment of ₱44.25 billion ($1.02 USD) conditional cash transfer (CCT) program of the government for 3.5 million households in the 2013 budget.

The program allows the social welfare department to disburse less than ₱1,000 a month per household, money for poor children enrolled in primary and secondary public schools and to health centers.

It also includes a health awareness drive for low-income communities. It encourages them to send their children to school, to prepare them for jobs and to make their lives better.

"The program has a long-term benefit," said Abad, who did not say the amount allocated for CCT and the number of poor people to be covered in the proposed 2014 budget.

It has been criticized as a source of corruption in local government units because village level authorities handle the money's disbursement in slum areas.

Critics say it encourages dependency among poor people, who are given money as incentive to send their children public health centers and public schools which already give free services. It promotes patronage politics and emboldens politicians to coddle slum dwellers for votes, critics said.

The government's continuation of the CCT program, which was begun by former President Gloria Arroyo, is further justified by a poverty incidence of 27.9 per cent in the first semester of 2012, compared to 28.6 per cent in 2009.

The Philippines is also in a rush. It has committed to lower poverty incidence to 16.6 per cent by 2015, in compliance with the United Nation's Millennium Development Goals (MDG).

A report of the National Statistical Coordinating Board (NSCB) showed that in 2011, the rich (who represents 15 per cent of the country's population of 100 million) generated 10.4 per cent income growth; the middle class, 4.3 per cent; and the lower class, 8.2 per cent.

A family of five with a monthly salary of ₱7,821 ($180.2 USD ) is right on the poverty line. A family that earns higher than twice to 10 times this amount belongs to the middle class, NSCB said.

The expanding inequity between the rich and poor contrasted with the country's 6.8 per cent overall GDP growth in 2012; and 7.8 per cent in the first quarter of 2013.

Vowing to work harder for better economic indicators, President Aquino promised, "We must make certain that this growth becomes even more inclusive — that the economic benefits do not merely trickle down to our people, but that every Philippine national is able to ride the rising tide of progress (in the Philippines)."

Presidential spokesman Edwin Lacierda pointed out the additional impact of NSCB's sectoral income growth report: "There has been growth in the lowest levels."

There is an ongoing focus on job-generating in sectors like agriculture, infrastructure, manufacturing, and tourism, said Ramon Carandang, chief secretary of the Presidential Communications Development and Strategic Planning Office, in response to criticism that heads of poor households still need jobs even if their children are socially protected and subsidized by the government's CCT program,.

But reporting on the distribution of the labor force last April, the Labor Force Survey said only eight per cent of Filipinos are in the manufacturing sector; 16 per cent in industry, 31 per cent in agriculture and 53 per cent in services (which is considered the least productive).

These is evidence that the country's employment and job generating model is hard to realize in the industrial and manufacturing sector.

Secretary Arsenio Balisacan, head of the National Economic Development Authority (NEDA) said that industrialization and manufacturing are the real answers to development and poverty reduction.

Subsidies for the poor and aiming for high annual national budgets will generally follow if the government starts building up on industrialization and manufacturing, Balisacan argued.

"The Philippines had a 39 per cent manufacturing-GDP ratio in the 1980s; and 33 per cent manufacturing-GDP ratio from 2010 to 2012. In comparison, Thailand has 44 per cent manufacturing-GDP ratio from 2010 to 2012, from a low of 30 per cent in the 1980s," said Balisacan, who pointed out the real reason why other Asian countries have overtaken the Philippines.

Meanwhile, some 10 million overseas Filipino workers (OFWs), who represent 10 per cent of the country's population, have been buoying the Philippine economy, rising to become on of the biggest sources of government revenue.

OFWs sent $ 21 billion USD to their relatives in the Philippines in 2012, fuelling a consumer-led economy.

Analysts from international funding agencies have said the OFWs must be empowered by helping them channel their money to investments in the manufacturing and industry sectors.

The Philippine government has responded with lectures on the importance of investment and entrepreneurship.

with report from the Gulf News

Continue reading

28 European Countries Opens to Philippine Airlines Friday - Ambassador Guy Ledoux

EUROPE Lifted ban for Philippine Airlines. EU Ambassador Guy Ledoux said PAL will be allowed to fly into the 28-member bloc from Friday (July 12, 2013), which will spur tourism and business links

More Europeans to have more fun in Philippines

The Philippines expects a "significant increase" in tourist arrivals from Europe following the decision of the European Union (EU) to lift a ban on Philippine Airlines (PAL) flying on its airspace.

In a statement, Tourism Secretary Ramon Jimenez Jr. described the EU's move as "an excellent opportunity for Philippine tourism." He said the country's flag carrier "will be able to effectively augment the existing services by foreign carriers that cater to tourists in the region."

The United Kingdom, Germany and France are among the key European markets for Philippine tourism. Once the PAL flights are made available, Jimenez said "we … expect a significant increase from these markets, to include those from adjacent countries.

On Wednesday, the European Union allowed PAL and Venezuela's Conviasa back into European airspace on the grounds of improved safety and compliance with EU regulations. Its executive, the European Commission, removed the two from a blacklist—the EU air safety list—after slapping an operational ban on PAL in 2010 and on Conviasa in 2012.

Beginning Friday, July 12, 2013 Philippine Airlines are allowed to fly over the European airspace as date of effectivity of the said lifting of ban.

Department of Tourism targets 10 Million

Jimenez said the lifting of the EU ban would greatly help in achieving the government's target of 10 million foreign visitors by 2016.

From January to May, a total of 213,598 European tourists visited the Philippines, representing an 8.5-percent increase from the 196,794 tallied for the same period in 2012, according to the Tourism Department.

The department has set targets of 574,565 European tourists this year and nearly 700,000 in 2014.

"As we work toward our goal … by 2016, we need our international air seats and connectivity greatly enhanced, in addition to our ongoing internal development work on infrastructure, destination and facilities," Jimenez said.

He expressed optimism that other Philippine carriers would address their own safety issues that would allow them to gain access to tourist-rich Europe.

Japan, South Korean restrictions

Sen. Ramon Revilla Jr., chair of the Senate public services committee, said the next goal should be the lifting of the EU ban on other Philippine carriers and the Japanese and South Korean restrictions on Philippine carriers.

"Our work is far from finished. But after five years, it is heartening to see positive results. We must be more aggressive," Revilla said in a statement. The senator also heads the joint oversight committee on the Civil Aviation Authority of the Philippines (CAAP).

"While there have been no formal responses from both countries (Japan and South Korea) regarding our requests to have the restrictions lifted, they have remained bull-headed and refuse to act. The challenge for the CAAP is to continue the momentum," he said.

The decision to lift the ban on PAL and Conviasa was an element of the EU's updated list which now leaves 280 airlines from 20 states still barred from flying in the EU.

"Today, we confirmed our willingness to remove countries and airlines from the list if they show real commitment and the capacity to implement international safety standards in a sustainable manner," the EU's Transport Commissioner Siim Kallas said in Brussels.

Earlier in Manila, EU Ambassador Guy Ledoux said PAL will be allowed to fly into the 28-member bloc from Friday, which will spur tourism and business links.

"This is a tremendous achievement in such a short period of time," Ledoux said.

He said the European Union would conduct further reviews so that other Philippine carriers could fly to Europe as well.

"This decision is very encouraging and is the first success of the CAAP and Philippine Airlines," he told reporters.

The Civil Aeronautics Board (CAB) will prioritize air talks with countries in Europe following the "selective" lifting of a three-year ban, according to its executive director, Carmelo Arcilla. He noted existing agreements with several key cities in Europe.

So far, the agency has identified Ethiopia, South Africa and Israel as destinations it would have air service discussions with for the year, Arcilla said in a text message. He added that it was looking to start talks with Italy "in the last quarter of the year."

PAL president Ramon S. Ang said the airline could fly seven times a week to London in the United Kingdom and at least six times a week to Paris in France. It intends to fly nonstop to these destinations "by September or October," he said.

The company is owned by listed PAL Holdings, which is controlled by San Miguel Corp. and the group of tycoon Lucio Tan. A trading suspension on PAL Holdings will be lifted today after the company complied with the public ownership requirements of the Philippine Stock Exchange.

"Remember that [PAL] used to operate to major EU cities in the 1970s and 1980s. These can be used by EU carriers and local airlines to resume flights between Europe and Philippines," Arcilla said.

The air panel also intends to negotiate for new and expanded traffic rights to Europe, he said.

 

ICAO audit

The EU announcement was expected, given that the Philippines passed an audit conducted by the International Civil Aviation Organization (ICAO) in February.

In 2009, ICAO conducted an audit and found "significant safety concerns." Its report was used as the main basis for the EU decision to ban all flights from the country beginning March 31, 2010.

Ledoux on Wednesday cited corrective actions undertaken by the CAAP as a reason behind the selective lifting of the ban. Other domestic carriers seeking to fly to Europe can present their case to the EU Air Safety Committee meeting on Nov. 29.

Revilla expressed optimism that the Philippines would soon regain its Category 1 status from the US Federal Aviation Administration following the favorable audit by ICAO in March and the lifting of the EU ban.

Category 1 means the air carriers from an assessed state may initiate or continue service to the United States in a normal manner and take part in reciprocal code-share arrangements with US carriers.

The Philippines remains classified under Category 2, which means that its civil aviation industry does not meet ICAO standards and its air carriers cannot initiate new service and are restricted to current levels of any existing service to the US while corrective actions are underway.

"The ICAO report and the EU ban in 2010 greatly affected the decision of the FAA in not upgrading our Category 2 status.  Now that there is a new audit report, and with the EU leading the way in lifting their ban, albeit partially, the FAA may see that we are serious in our efforts toward the global standard," Revilla said.

Jimenez said the tourism industry was looking forward to the continued support of various government agencies for improvements in airport infrastructure development, aviation safety and security, and air services agreements "so that we can continue to show to the world why it's more fun in the Philippines."

With reports from Tina G. Santos, Norman Bordadora, Miguel R. Camus of Inquirer and AFP

Continue reading